$4.25T 2013 Leveraged Loan Volume Trails Only 2007

By Michael Aneiro

Data service Dealogic has finished tallying the 2013 leveraged loan market and finds that last year’s $4.25 trillion global loan volume was 22% higher than 2012′s total and marked the second-highest total on record, trailing only the $4.89 trillion recorded in 2007, which marked the peak of the last credit cycle for leveraged finance.

Driving all this issuance was an insatiable demand for leveraged loans among investors, largely due to loans’ relative high yields and floating interest rates. Loan mutual funds and ETFs have now recorded 81 straight weeks of net inflows, according to Lipper data.

All this money being loaned to speculative-grade companies recalls the peak of the last credit cycle, which saw some of the biggest-ever leveraged buyouts of companies like TXU, First Data and HCA, not all of which turned out well for investors. Dealogic said average loan deal size reached $458m in 2013, up from $395m in 2012 and the again highest annual average deal size since 2007 ($516m).

2014 should see another near-record loan volume as credit risk for junk-rated companies remains a distant concern and investors keep looking for anything that can shelter them from interest-rate risk instead.